Single-Premium Life Insurance

See: Life Insurance.

In the insurance game, a premium is just a payment. The term refers to the amount you pay every month for your insurance coverage.

The single premium life insurance consists of a policy where you only pay once. You pay a lump sum upfront, and then no more premiums over the life of the policy. In exchange for the money you're handing over now, your beneficiaries will receive a check when you die.

So...why sign up for the insurance? Why not just save your lump sum and use that to pay to your beneficiaries. Why not just stick the cash in the bank and let your family collect it if you croak?

Well, because the payout will be significantly larger than the amount you put in. The payoff amount depends how much you pay upfront, of course, plus your age and life expectancy. The insurance company doesn't just stick your money in the bank. It invests it. If you have a long time to go before your likely demise, the insurance company can reasonably assume a significant return on the money you are paying now.

As a result, the payout you guarantee with the policy could be several times larger than the amount you put in now. Plus, you don't have the risk inherent in trying to invest the money on your own. You have nothing to worry about...except, of course, sitting back and waiting for the sweet release of death.